Francis v. Hershey State Bank (In re Francis' Estate)

• Court: Iowa Supreme Court
• Writing for the Court: FAVILLE
• Citation: Francis v. Hershey State Bank (In re Francis' Estate), 204 Iowa 1237, 212 N.W. 306 (Iowa 1927)
• Decision Date: 15 February 1927
• Docket Number: No. 37989.,37989.
• Parties: IN RE FRANCIS' ESTATE. FRANCIS v. HERSHEY STATE BANK ET AL.

204 Iowa 1237

212 N.W. 306

IN RE FRANCIS' ESTATE.FRANCIS

v.HERSHEY STATE BANK ET AL.

No. 37989.

Supreme Court of Iowa.

Feb. 15, 1927.

Appeal from District Court, Muscatine County; D. V. Jackson, Judge.

Application in probate for an order that certain promissory notes listed in the inventory of the executor were, in fact, a gift to the applicant and not assets of said estate. A resistance was filed to the application by a legatee. The relief sought was granted. Reversed.

Vermilion, De Graff, and Albert, JJ., dissenting.Matthew Westrate, of Muscatine, for appellant Edgar A. Francis.

J. F. Devitt, of Muscatine, for appellee.

Hoffman & Hoffman, of Muscatine, for executor Hershey State Bank.

FAVILLE, J.

On November 30, 1920, the testator executed his last will and testament. He died August 16, 1924. He left surviving him three adult children, a daughter and two sons. One of said sons is the appellant and the other the appellee in this action. The testator left a will, item 1 of which provides for the payment of debts. Item 2 is as follows:

“I have made, at various times, gifts to my three children, Edgar Francis, Harold Francis, and Edna Kern, and in making the same I have given my daughter approximately five thousand ($5,000) dollars more than I have given to my sons, and it was my desire and intention at the time I made said gifts to so favor her because she was a daughter and not a son and not so well able to earn for herself, and I hereby expressly confirm all of such gifts and refer to and make a part of this will my account book showing the several accounts with my said children, and showing the gifts so made. If the said book shows that any of the amounts given to my said children were really made as loans and not as gifts it is my desire that the amounts advanced as loans be considered as a part of my estate and be set apart to such of my children as such loans have been made to as a part of their share of my estate.”

Item 3 divides the residue of the estate equally between the three children of the testator. The executor listed in the inventory of the personal property belonging to said estate a certain note of the appellee in the principal sum of $4,913.61, dated November 11, 1921, due on demand, and a second note of $503.15, dated April 3, 1922, payable on demand. Both notes bear interest at the rate of 6 per cent. per annum.

It is the contention of the appellee that said notes were canceled and delivered to the appellee by the testator on or about the 24th day of December, 1923, and constituted a completed gift between said parties, and that the same should not be listed as assets of said estate. The contention of the appellant is that the cancellation and delivery of said notes to the appellee was in the nature of an advancement and not a gift, and that appellee should be charged with the same. The record discloses that prior to October 24, 1921, the appellee had obtained various sums of money from his father, for which he had given his notes, four in number. Two of said notes were executed prior to the date of the will and two subsequent thereto. On October 24, 1921, appellee obtained a further sum of $503.15. The total of said notes and cash, together with the accrued interest, at that time amounted to $4,913.61, for which a new note was given by appellee to the testator. The note of $503.15 dated April 3, 1922, was for money sent at the time by telegraph to the appellee by his father, including the cost of transmission. The appellee lived in California. In December of 1923 the testator was in poor health, and appears not to have been actively engaged in business. The appellee visited his father at that time, and on the 23d day of December, 1923, the testator instructed an employé of the bank of which he was president to bring appellee's notes to the testator's house and to compute the interest on them. This was done. The notes had been kept in a box in the bank where the testator kept his valuable papers. The interest on each note was computed by the employé and a slip of paper showing the same was attached to each note. The following day the testator again called the employé to his home and directed him to take the notes back to the bank and run them through the canceling machine and return them to him. This was done. When the employé returned to the home of the testator with the canceled notes, the appellee was at the house. The employé handed the notes to the testator, who handed them to the appellee. The employé is unable to testify as to the exact conversation, but testifies that the testator made a remark to the appellee to the effect that, “I believe these are what you are looking for, Harold.” The widow of the testator testified that she was present at the house at the time referred to, and that the testator said to her, as she was passing through the room, “Mother, what shall we do with this boy's notes?” and that she replied, “Do as you please; if you would like to--” The notes bore the cancellation stamp by perforation, “Paid 12--24--23.” The appellee produced said notes upon the trial.

The testator kept an account book, which was produced, and on a certain page there appeared the heading “Bills Receivable.” Under said heading are listed various notes, beginning with the date April 16, 1919, and extending to April 3, 1922. The four notes which were merged in the note of $4,913.61 are listed in the said book under said heading, with date, amount, and appellee's name, and opposite each is a memorandum, dated November 11, 1921, and indicating that said note was renewed on said date. The note of November 11, 1921, of $4,913.61, is listed in the same way, as is also the note of April 3, 1922. There are no recitals in said book respecting said last two notes except the listing and description of the same.

In the spring of 1924 the testator personally prepared and filed with the United States government his income tax return. Under the heading in said report, “Deductions,” appears the item: “Bad debts. Worthless note, $6,000.” Said item referred to the two notes in controversy. It also appears that after the death of the testator an investigation of said matter was made by the United States government, and the said item of deduction was disallowed.

The question arises whether, under all of the facts shown, the cancellation and delivery of the notes to the appellee was a gift. The evident intent of the testator, as expressed in his will, was to make an equal division of all of his property among his three children, except a specific bequest of $5,000 additional to his daughter. He recites in item 2 that he has at various times made gifts to his children, and that he refers to and makes a part of his will his account book, showing several accounts with his said children, and showing gifts so made. There is nothing in the record to indicate that the said book contained any record of gifts to his children, describing the same as such. The will further provides:

“If the said book shows that any of the amounts given to my said children were really made as loans and not as gifts, it is my desire that the amounts advanced as loans be considered as part of my estate and be set apart to such of my children as such loans have been made to as a part of their share in my estate.”

The book shows the two notes in suit to be listed as bills receivable along with other notes, all of which are designated as bills receivable in said book, and clearly appear in said book as loans. There is no entry of any kind or character in said book, indicating in any way that the two notes in question were described by the testator as being any other than loans. According to the express recitals of the will and of the book therein referred to, the two notes in question, upon that record, would obviously be regarded as loans. If we had nothing in the case except the terms of the will and the recitals of the book conforming therewith, the conclusion would be inevitable that the two notes in controversy were loans and should be charged against the share of the appellee, as provided in the will. This would have been the situation and the result had the testator died prior to December 24, 1923. We therefore are called upon to determine the effect of the transaction of December 24, 1923, at which time the testator secured the notes, caused the interest to said date to be computed thereon, and, having ascertained the entire amount that was due on said notes, caused the same to be marked as paid and then delivered them to the appellee. The testator did not make any entry in his book signifying that the two notes which had been listed in the book were to be treated as gifts, or that they had been canceled. Did this transaction of December 24, 1923, constitute in law a gift to appellee, notwithstanding the terms of the will?

[1][2][3] It is a well-established rule in this state that property given by an intestate to an heir will be presumed to be an advancement instead of a gift and that the burden rests upon the heir to establish that it was a gift instead of an advancement. Such is the...